Retail, office or industrial property – which is the most stable commercial property investment?
Long leases, regular rental reviews and month-to-month income. These and many more reasons exist for commercial property being a stable investment. But commercial property comes in many types; retail, office and industrial being the staples for investors – So, which is the most stable commercial property investment?
What makes a stable commercial property investment?
Stability in commercial property comes back to your tenants. If you’re keeping them happy, and they’re performing at their best in the environment you’ve provided, then there’s every bit of chance that rent will come in regularly, on-time and long-term.
There are many ways to do this, but it’s different for each commercial property type.
One way commercial properties can better appeal to tenants is with properties that have flexible usage.
Flexibility is an industrial property’s bread and butter. Many electrical contracting or engineering businesses who use warehouse space also need an office attached to it. The additional benefit of having an on-site office for these industrial property occupants is that it is cost-effective. Tenants are paying the same square meterage on both office and warehouse space but getting more use out of it.
Broad usage adds a degree of safety for those investing in industrial property. It’s why many say it is the best commercial property investment.
On the other hand, retail properties can be more specific. One size does not always fit all and can sometimes make it difficult to replace a tenant – unless you know how to create value from a vacating commercial tenant.
Well-placed properties in the market
Different commercial property classes can take turns at being the “most stable.” This is because property markets and precincts are forever evolving.
Currently, the retail property market is battling against online stores (however, many retailers have found the key to retail survival) and as a result, some investors are seeing uncertainty in retail property investments.
Meanwhile, office and industrial property markets are seeing record growth and stability.
So far in 2019, Brisbane’s Metro office market has been labelled most improved in Australia. Perth is following closely, as a recovery in its office market is brought about thanks to rising commodity prices and renewed mining investment.
And Brisbane’s industrial market has broken its 2018 sales record, with three industrial property sales with price tags over $100 million. In the 12 months to June 2019, leasing transactions soared 49 per cent compared to the previous year.
Both domestic and foreign investors are loving office and industrial property in Australia, with stable yields and steady growth appearing across the country.
Low maintenance properties
For example, a warehouse doesn’t need the same pleasing aesthetics as an A Grade office premises. And given that industrial tenants are usually handy, minor repairs can sometimes be done by the tenant.
Less maintenance and repairs can mean larger profit margins for you as an investor. Expenses are minimised, as is the work for your property manager.
But this doesn’t mean properties which need no improvements are ideal investments. Our most popular commercial real estate investments have involved some form of upgrading, improvement or value-add.
Providing that a commercial property investment is well-researched before buying, and an intense due diligence has been applied by experts, any commercial property type can be a stable investment. Just ask our investors.
For more information on how to invest in a stable commercial property investment, get in touch with Properties & Pathways today.